ShipRecycling Pages:

07 January 2016

Ship Recycling List Open, but Beaching Still in Doubt:

The European Commission has opened the application procedure for the
European List of Ship Recycling Facilities. The Commission will review
applications and publish a first version of the list before December 31, 2016. Early
in January 2016, it will also issue guidelines on the requirements for ship
recyclers and independent verifiers certifying yards.

The list comes in response to criticisms of ship breaking practices in
places such as the Indian subcontinent which indicate that many yards operate
under dangerous and polluting conditions including the practice of beaching
where ships are dismantled on tidal sands.

In order to be approved, ship recycling facilities need to show that
they meet the strict requirements of the E.U. Ship Recycling Regulation
regarding infrastructure and procedures. These requirements are for the most
part a copy of the yet-to-enter-into-force Hong Kong Convention for the Safe
and Environmentally Sound Recycling of Ships, but inconsistencies could arise
if the European Commission interprets some of the vaguer provisions in the
regulation in a way that bans beaching even though the Convention does not ban
the practice, says Dr Nikos Mikelis, non-executive director of leading cash
buyer, GMS.

The European Commissioner has given some mixed messages in the past
regarding the intentions of the Commission. In a previous speech to the
European Parliament he refrained from making it clear if he was against some or
all forms of beaching. He has also stated in written responses to questions
from ministers that the Commission is not going to turn down yards on the basis
of their location or on the basis of the method of recycling used. However,
another official from the Commission, with responsibilities on the issue, has
expressed more negative views on beaching.

Industry Divided on Beaching

Earlier this year, GMS came out in support of statements made by the
Danish Shipowners’ Association which refused to ban beaching outright following
the announcement by their Norwegian counterparts against the practice.

A Danish delegation visited ship yards in Alang, India, to see how some
had upgraded their facilities to comply with the Hong Kong Convention. The
Association then stated that it believed it is important that the market makes
a distinction between those yards which use beaching and comply with the Hong
Kong Convention and those that do not.

GMS agrees and also feels that owners who simply decide where to
recycle ships based on secondary (mis)information and geographical location do
a disservice to their stakeholders and the industry. Often these decisions are
made on perceptions rather than reality; political pressures rather than
economic facts; irrational exuberance rather than pragmatic evaluations, said
GMS in a statement.

Ban Counterproductive

GMS believes that a beaching ban by the European Commission will be
counterproductive as it would discourage improvements in the ship recycling
industries of South Asia.

Firstly, it will mean that E.U. flagged ships will be able to be
recycled only in Turkey and China. The Turkish recycling market has a finite
capacity with only 20 small yards while China’s demand for steel from recycled
ships, which varies greatly year to year, has dried up in the last two years
leading to a collapse in prices paid by China. This situation will undoubtedly
lead to many E.U. flagged ships changing flag to register with states where no
such ban is imposed to allow them a realistic choice of recycling destinations,
says GMS.

Secondly, prices will also be severely affected as E.U. registered
ships forced to deal with only Turkish yards could face a collapse in value.
Traditionally, southern Asian prices have been higher by about 40-60 percent than
in Turkey and China due to the higher demand and value for ship steel,
machinery, equipment, spares and ancillary items.

Banning beaching will only discourage other yards in the region from
raising standards, thereby destroying the current “virtuous circle” of
improvements among shipyard owners in Alang, says GMS. If all yards in South
Asia are excluded from European approval, regardless of the improvements they
have made in their infrastructure and work procedures, they will have no
interest in supporting their government’s ratification of the Hong Kong
Convention.

Clean Logistics

NGO Shipbreaking Platform, a critic of beaching, is encouraging
facilities to be involved in the European Commission’s list. “We encourage all
ship recycling facilities globally that think they are ready to comply with the
European requirements to submit their applications,” says Patrizia Heidegger,
Executive Director of the NGO Shipbreaking Platform. “The European List will
for the first time provide all stakeholders – in particular the shipowners, but
also the shipping industry’s business partners demanding clean logistics and
sustainable shipping such as banks, pension funds and the cargo owners – with a
clear reference from where to choose high-quality ship recycling facilities in
line with international and European environmental and labor standards.”